Cape caught in web of surging oil prices

As the price of crude oil continues to jump and dip and flirt with $100 per barrel, volatile prices are becoming a fact of life for consumers and business owners.

SARAH SHEMKUS

Sometimes, Hall Oil Co. in South Dennis has to change the price of a gallon of heating oil twice in one day.

"It is not unheard of to see a price change come across at noontime," said owner Ken Foster.

As the price of crude oil continues to jump and dip and flirt with $100 per barrel, volatile prices are becoming a fact of life for consumers and business owners.

The price for a barrel of light, sweet crude oil yesterday rose as high as $99.11 in day trading on the New York Mercantile Exchange, but closed at $97.70.

Just three months ago, the price hovered around $68 per barrel.

Because oil is an integral part of a wide range of industries — from transportation and shipping to plastics and clothing — the possibility of a $100 barrel of oil has made a lot of headlines.

Such an event, however, is unlikely to trigger profound price changes, experts said, though most were hesitant to predict in any detail how costs would shift. The more pressing concern, said business owners and industry insiders, is not the $100 benchmark, but the general upward trend of oil prices.

"It's a number that's frightening because it does push all refined products to a new level," said Michael Ferrante, president of the Massachusetts Oilheat Council. "But I don't think it's going to be a significant jump in the existing price of heating oil — we're only talking about a couple of dollars of swing."

To hit $100 a barrel the price would have to increase $2.30 from yesterday's closing. With 42 gallons in a barrel, that would mean a jump of 5.5 cents per gallon of crude.

Nonetheless, some industries are likely to experience significant impact.

The Energy Information Administration, a federal data repository, predicts heating oil prices along the East Coast will continue to rise along with the cost of crude.

"That's where we're looking to see some of the larger price gains over the next week or so," said David Hinton, a petroleum industry analyst for the agency.

Gas stations are also feeling the sting.

On the Cape, the average price for a gallon of gas yesterday was $3.08, about 80 cents higher than it was a year ago, according to AAA Southern New England.

With credit card fees, other operating expenses and the need to keep prices competitive, gas station operators have thin profit margins, said Paul O'Connell, executive director of the New England Service Stations and Auto Repair Association.

"It's a terrible time for the small-business owner who sells gasoline," O'Connell said. "Many of them are being hurt financially because the expenses are rising faster than profits."

Nonetheless, O'Connell reported that the members of his association have not yet reported any significant decline in business.

There seems to be, however, room for gas prices to keep going up.

The price of crude has risen nearly $30 a barrel — around 70 cents a gallon — over the past few months, while gas prices have gone up only 33 cents a gallon during the same period, according to numbers from AAA.

Consumers could see greater price increases if changes in gas prices become more proportional to shifts in the cost of crude, said Peter Cohan, a management consultant and adjunct professor of management at Babson College in Wellesley.

"It wouldn't surprise me to see the price of gasoline hit $5 a gallon," Cohan said.

Companies that depend on oil products to conduct their business are also grappling with increasing costs.

At Cape Air, the growing expense has not yet been passed onto consumers, said spokeswoman Michelle Haynes.

But the Hyannis-based airline uses 2 million gallons of aviation fuel each year, the cost of which has increased by about 25 percent over the past year, Haynes said. The airline may soon have to consider adding a fuel surcharge to the price of tickets.

The company has imposed such a fee in the past, said Haynes, and no customers objected.

"They put gas in their car — they know," she said.

In October, the Woods Hole, Martha's Vineyard and Nantucket Steamship Authority approved a budget for next year that included a $1 to $5 bump in individual and vehicle fares.

For each dollar increase in the price of a barrel of crude oil, the Steamship Authority incurs nearly $100,000 in additional expenses, said Robert Davis, the ferry line's treasurer.

Now, facing oil prices nearly $10 higher than in October, the authority is reviewing its budget to see if further increases may be necessary, Davis said.

While businesses prepare for rising costs, however, Ferrante offered a small bit of optimism.

"My gut tells me that the price of crude is going to fall," he said. "Historically, when they have gone up, they have gone down."

Sarah Shemkus can be reached at sshemkus@capecodonline.com. Staff writer Robin Lord contributed to this report.

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